Investing, Asset Allocation, Economics & the Search for the Bottom Line

Strategic Briefing | 4.25.12 | A New Recession For Britain

UK slides back into recessionReuters | April 25
Britain’s economy is in its second recession since the financial crisis, data showed on Wednesday, heaping pressure on Prime Minister David Cameron’s coalition government as it battles a series of political embarrassments. The unexpected contraction in the first three months of 2012 – a 0.2 percent dip in gross domestic product – confounded forecasts for 0.1 percent growth.

Britain falls back into recession in first quarterMarketWatch | April 25
The results deal a blow to the British government and Chancellor of the Exchequer George Osborne, who have insisted that austerity measures will set the stage for growth.UK back in recessionThe Independent | April 25
The decline in gross domestic product (GDP) was driven by the biggest fall in construction output for three years, while the manufacturing sector failed to return to growth, the Office for National Statistics (ONS) said.U.K. Returns to Recession in First Quarter on Building SlumpBloomberg | April 25
The fall in GDP from the fourth quarter was due to a 3 percent drop in construction, the most since the first quarter of 2009, and a 0.4 decline in industrial production. Manufacturing contracted 0.1 percent. Services, the largest part of the economy, expanded by 0.1 percent, boosted by transport, storage and communication. Rising energy prices, government spending cuts and anemic wage growth are squeezing consumers, creating a drag on the recovery. Pay growth slowed to 1.1 percent in the three months through February, less than a third of the inflation rate.UK economy in double-dip recessionBBC News | April 25
The BBC’s chief political correspondent, Norman Smith, said the Treasury was again blaming the difficulties facing the UK economy on the eurozone, with sources saying the eurozone is predicted to enter recession and therefore “it would be hard for the UK to avoid one”. Some 40% of the UK’s exports go to the eurozone.Did the euro crisis cause the double dip recession?The Guardian | April 25
I’ve been speaking to Tim Leunig, chief economist at the liberal thinktank Centre Forum. He told me it’s very difficult to tell from these figures the causes of the double dip. He said: “There’s very little you can say about that either way unless the ONS say that exports have collapsed. The construction industry is not a eurozone issue. If the eurozone had done better other sectors might have grown. If it’s construction it’s not really the austerity measures either – it’s not teachers losing jobs.”U.K. Economy Unexpectedly Slips Into Recession In Q1RTT News | April 25
IHS Global Insight’s Chief UK Economist Howard Archer said he strongly suspects that sometime down the line that the GDP data will be revised up to show modest growth in the first quarter, but by then the recession headlines will have been written…. In contrast to the official GDP data, the British Chambers of Commerce’s Quarterly Economic survey suggested that the economy has returned to positive growth in the first quarter of 2012. Recently the International Monetary Fund lifted its 2012 growth forecast for the U.K. to 0.8 percent, which is same as the government estimate. Chancellor George Osborne, in his budget speech, said the Office for Budget Responsibility revised up its growth forecast for the economy this year from 0.7 percent.
Source: BBC News